It's Your Money  

Do it for your family

There are far too many Canadians without adequate life insurance coverage.

  • Some have the wrong type of insurance
  • others don’t have enough
  • many simply don’t have any coverage at all.

It’s hard to blame many of these under-insured people as the information out there is questionable at best and many people who sell insurance policies are not doing a great job. But either way, the problem still exists.

I have written about the needs for life insurance before – particularly strong for those with young families – but I wanted to expand on this subject a little more as the message still isn’t reaching those who need to hear it most.

I’ll start off with a quick story:

A few years ago, my brother’s next-door neighbour was killed in Calgary while driving his motorcycle. His wife had just given birth to their second child and he was the sole income earner for this young family of four. They had just moved into their new house that they bought after he landed his dream sales job making $125K per year.

He didn't have any life insurance.

With no savings built up and the house fully mortgaged, his wife was left with a huge debt load, two kids and no money. With the housing market retracting, she had no choice but to claim bankruptcy and walk away from everything.

She is living with her two young children in her parent’s basement and relying on them for financial assistance.

The young man from the story above was 26 years old when he died. $1 million of term life insurance would have cost him approximately $40-50 per month; well within his financial means at the time.

So why didn’t he have this insurance coverage?

People have many different reasons for not setting up proper insurance but there are some common themes that keep reappearing:

One common reason we hear is the price.

There is a huge misconception out there as to what it really costs. A recent study had respondents estimate what the cost was for a 30-year-old to buy insurance and the average person estimated 300-400% of the actual cost.

My example above shows how affordable it can really be.

The second one we often hear is about the need to spend on other priorities.

While many think that paying off debt, saving for retirement and even putting money aside for their child’s education take more priority, they aren’t looking at the risks properly. Life insurance is not a luxury, it’s a necessity.

The third, and often most common reason people don’t have insurance, is that they simply haven’t gotten around to it.

Procrastination is often the  No. 1 cause of financial failure.

It’s amazing that so many people out there understand the importance of this insurance and yet they can’t “find the time” to get it set up.

Take a look at your spouse and children tonight and decide if you really are too busy to spare one hour of your time to ensure their financial stability.    

Finally, there are many people who think they’re already covered because their employer’s group benefit plan provides a life insurance component.

These plans almost always cover one to two times your annual salary at most which, I can pretty much guarantee, is not enough coverage.

Take the time to sit down with a certified financial planner to discuss how much coverage you should really have.

If you know someone who has a young family, I urge you to share this article with them. If the unthinkable happens, at least they’ll know that the family they leave behind will be taken care of.          

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About the Author

Brett, designated as a chartered investment manager and certified financial planner, is the regional director (Okanagan) for IG Wealth Management.

In addition to his “day job," Brett was appointed to the board of directors of FP Canada (formerly FPSC) in 2014, named as the board’s vice-chair in 2017 and will take over as board chairman in June. 

Brett has been writing a weekly financial planning column since 2012 and provides his readers with easy to understand explanations for the complex financial challenges that they face in every stage of life.

Enhancing the financial literacy of Canadian consumers is a top priority of Brett’s and his ongoing efforts as a finance writer and on the regulatory side through the FP Canada board focus on this initiative.   

Please let Brett know if you have any topics that you’d like him to cover in future columns by emailing him at [email protected].

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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